Solyndra, Solar Power, and the Road Ahead

The case of the solar company Solyndra has been getting widespread attention, but much of the current discussion misses the point. While some would like to portray the collapse of this company as the downfall of the U.S. solar industry, the larger picture tells a very different story.

Solar power is rapidly expanding around the world, driven by opportunities for innovation and investment in low-carbon energy. According to the International Energy Agency, solar power is on a path to provide 20-25 percent of the world’s electric power by 2050. This is a huge market opportunity. And, a recent report by Ernst & Young confirms that the solar energy market has grown from less than $1 billion in 2000 to $79 billion in 2010.
Many countries are moving toward more renewable energy production. Last year, China alone invested $54.4 billion in clean energy – more than any other country.

But that doesn’t mean there are no opportunities for the United States. In fact, policies that create clean energy demand can help drive manufacturing and job creation up and down the supply chain. One recent industry study found there are over 100,000 Americans currently working in the U.S. solar industry. And, somewhat surprisingly, the United States is actually a net exporter when it comes to solar energy products, with $1.9 billion in net exports in 2010.

Overall, however, the United States is lagging in investment in renewable energy. According to a report by the PEW Charitable Trusts, the United States falls in the middle of G-20 countries in terms of financial support and investment in clean energy. Spain, Brazil, the UK and China have all invested at least 3 times more than the U.S. in this sector.

It is therefore worth asking what are some of the factors that are helping clean energy to flourish in other countries?

One major factor, according to research by the World Resources Institute and the Peterson Institute for International Economics, is the presence of a clear policy framework that provides long-term certainty to investors. In Germany, for example, the Renewable Energy Act was put in place in 2001, which is based on a feed-in tariff that ensures renewable energy will be fed into the grid and provides price certainty for that technology. Germany’s renewable energy share just hit 20 percent in the electricity sector, and is on its way to meet the country’s national target of at least 35 percent renewables by 2020. The industry has created 347,400 new jobs and is projected to create half a million jobs by 2030. Germany’s progress is linked to the long-term price signals that encourage industry to plan, hire, and build in this sector.

Similarly, in China, the government has made a clear commitment to include solar and other renewables as part of its energy mix. In its 12th Five-Year Plan, the Chinese government has set a target to shift to 11.4 percent non-fossil energy by 2015 (and 15 percent by 2020). It is expected that China will raise its target for solar capacity to 10 GW in 2015 and 50 GW by 2020. China has put in place policies to both support the supply side with incentives for research and development as well as manufacturing, and the demand side with the recently introduced solar feed-in-tariff. These policies have set the conditions for China to surge ahead in the high-tech rush.

Other countries, such as the Philippines, Thailand, and South Africa, are similarly putting in place national renewable energy strategies. WRI has found that more and more developing countries are implementing “smart renewable energy policies” in order to increase energy security and reduce vulnerability to international fuel prices, expand energy access for their population, reduce pollution and health risks, and spur economic development.

What is clear from this picture is that solar energy production is indeed surging ahead worldwide. This is largely driven by policies and market conditions that accelerate the innovation required to make renewable energy more competitive with traditional fossil fuels. These factors can also help drive both demand and supply of renewable energy in the United States. But, ultimately, the United States needs national policies that provide greater certainty to businesses that investing in clean energy is a good bet over the long-term.

Innovation in new technology, of course, has always been the backbone of American society and its economy. Certainly, it isn’t without risks, but it can hold considerable rewards. Rather than finger-pointing, U.S. officials should look for ways to help America take advantage of the clean energy opportunities ahead.